The Gujarat High Court has set aside the levy of separate Integrated GST on ocean freight in case of import of goods on CIF basis. It held that Sl. No. 9(ii) in Notification No. 8/2017-Integrated Tax (Rate) and Sl. No. 10 in Notification No. 10/2017-Integrated Tax (Rate), levying tax on supply of service of transportation of goods by a person in a non-taxable territory to a person in a non-taxable territory from a place outside India up to the customs station of clearance in India and making the importer liable for paying such tax, are ultra vires the provisions of the Integrated Goods and Services Tax Act, 2017.
Observing that IGST was already levied and collected on import of goods on the entire value which includes the ocean freight, the Court termed the separate tax on the services components (freight) as erroneous misconception. It held that impugned notifications levying tax again as a supply of service, without any express sanction by the statute, are illegal and liable to be struck down. Elaborating further, it noted that the importer while importing goods on CIF basis, neither availed the services of transportation of goods in a vessel nor he was liable to pay the consideration of such service, and hence the writ-applicant (importer) was not the ‘recipient’ of the ‘Transportation of Goods in a Vessel service’ as per Section 2(93) of the Central GST Act. It was held that importer cannot be made liable to pay tax on some supposed theory that the importer is directly or indirectly the recipient of the service.
It was also observed that Section 5(3) of the IGST Act does not further provide that the Government can specify the person, other than the recipient of supply, as liable to pay tax. The Court in the case Mohit Minerals Pvt. Ltd. v. Union of India was also of the view that the said service was neither an inter-state supply nor an intra-state supply, and that Section 7(5)(c) of the IGST Act is also not applicable to the cases on hand. Noticing that the entire transaction took place outside the taxable territory, it was held that the mere fact that the transportation of goods terminates in India, will not make such supply of transportation of goods as taking place in India.
The High Court in its decision dated 23rd of January 2020 also held that double taxation, by way of delegated legislation, when the statute does not expressly provide, is not permissible. It also noted that even internationally, the service of international transportation, both relating to imports and exports, is GST-free (i.e. no tax is payable on the outward supply and the tax paid on the inward supplies can be claimed as refund). It observed that the tax is collected from the importer of goods by including it in the value of imported goods.